Web 3’s Current Problems
Tascha Labs recently released a podcast discussing Web 3’s current problems.
@TaschaLabs recently released a podcast discussing Web 3’s current problems.
She also reveals the next big investment opportunities in Web 3.
We listened to the entire podcast to provide you with a summary of the important points
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Tascha takes a different approach to look for investment opportunities
She says that “Today’s problems of Web 3 are tomorrow’s investment opportunities.”
So, looking for projects that solve the problems of the Web 3 industry is the biggest investment opportunity
Tascha outlines the 8 big problems of the Web 3 industry:
1. Poor scaling and UX for DEXes
Decentralized exchanges are essential to facilitate the trading of Web 3 assets
But most of the DEXs have a bad user experience
Some of the problems include impermanent loss, slippages, MEV bots, slow txn execution, poor txn control, lack of analytics, screening tools for the Web 3 assets
2. No real-world integration for on-chain lending
The demand for lending from decentralized “banks” mostly comes from speculation
That needs to change if #DeFi wants to attract organic liquidity and a sticky user base from the real world
Also, users don’t have the ability to use real-world assets as collateral in the on-chain lending economy
In fact, the DeFi lending industry has not even successfully adopted NFTs as collateral
3. Unreliable 1:1 mapping with underlining assets
One of the fundamental issues with the #NFT industry is the 1:1 mapping between the on-chain token and the underlying asset it represents
4. Weak tooling for NFT storage, display, and verification
The primary use case for NFTs today is digital collectibles which is a limited market
However, future use cases involve NFTs as a verification tool to access membership benefits, etc.
But, most of the use cases can be fulfilled by a #Web2 database
So, for NFTs to be better than Web 2 databases we need:
- A better integration of NFTs with other parts of the Web 3 ecosystem
- User-friendly infrastructure for storing, displaying, verifying NFT ownership
5. Poor integration with the rest of the blockchain economy
The blockchain economy will require the integration of various sectors of the economy in order to grow
However, we have very little connection between the DeFi and the NFT industry
6. High cost & low performance of public blockchains
Many blockchains are still too expensive or unscalable for a large number of users
This will be a key factor for public blockchains to compete with centralized networks (CBDCs)
7. High friction & poor security of cross-chain bridges
Cross-chain bridges are one of the most exploited sectors in the blockchain economy
However, txn volumes on cross-chain bridges remain high
This indicates that there is an essential demand for cross-chain bridges
8. Lack of non-crypto projects with viable products
Most of the Web 3 protocols end up building project tokens that are the final product
Tokens primarily generate speculation from the outside world, however, adoption falls back to normal as soon as the bear market hits
Tascha then continues to answer some questions:
Q1: The biggest problem with most Crypto investments is that value accrual doesn’t flow to token holders. Thus, the project can be successful but that is independent of the token success, right?
Tascha doesn’t seem to entirely agree with it
The token is considered a ‘semi-equity’ if one wants to attach the token value to the revenue of the project
However, there are various kinds of tokens that have value (such as meme tokens like $DOGE) but no revenue
So, the right way to gauge the performance of the project is to determine whether the project has a viable product for the Crypto space
People will actually want to pay for that viable product regardless of the revenue and that creates a genuine adoption of the project
Q2: Will we need more scalability on the infrastructure side (high throughput) to solve the issues related to DeFi UX?
Tascha agrees that we definitely need more performant blockchains
However, there are still issues that are inherent in the DeFi operating model
Example: The AMM model is basically different from the traditional asset swaps or asset exchanges which use an order book model
The problem with AMMs is that it’s really not that scalable and slippage is a constant issue
Q3: Would you recommend investing in the tokens of these projects or to look for ways to invest in equity?
Tascha believes the boundary between tokens and equities is getting blurred as time goes on especially as tokens capture more value created by the project
But why?
Let’s say a project issued a utility token in order to bootstrap user growth and to give users incentive to use their product
To provide incentives to users, the project uses its future revenues to buy tokens and pays them as yields to users
So, as a customer of the company and also a token holder, one essentially shares in the revenue of the company
How is that different from a shareholder in a traditional company?
A shareholder of a company owns the claim to the future profits of the company
The point is that even though the token holders are not called owners of the company and shareholders are traditionally the ‘owners’ of the company
The two really start to merge together since they both take a slice of the value added created by the company
The corporation’s mandate to maximize profits for shareholders goes beyond shareholders with the advent of tokens
Now it is also incorporating its token holders (customers) to share its profits
So, the stakeholder base for any corporation essentially broadens from its shareholders to its customers
The value gets distributed to a much wider set of society and thus tokenization becomes a positive sum game for society in the long run
See the full podcast episode:
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